What's your strategy for coping with big losses?

Hello, I am curious about how you guys cope with the stress of a big loss or draw-down....

Do you have any advise for novices about how to cope in such situations?

Everyone knows that trading psychology is very important, keeping a cool clear head for decisions, etc... But how can we keep cool in the face of such disasters!

 

I wish you the best of luck in your trading...

Re: What's your strategy for coping with big losses?

 

Hello, I am curious about how you guys cope with the stress of a big loss or draw-down....

Do you have any advise for novices about how to cope in such situations?

Everyone knows that trading psychology is very important, keeping a cool clear head for decisions, etc... But how can we keep cool in the face of such disasters!

 

I wish you the best of luck in your trading...

Mate, the only advice I can give you is to ALWAYS know your Stoploss and set it to ALL your trades immediately.

 

Basically this is the level which you feel comfortable to lose some money from your account and still can continue to trade.

 

Acting in such a way you will NEVER experience stress with big losses. If your trading strategy is profitable, your wins will add more to your account than all losses.

 

So just accept losses happened due to Stoploss. This is not to say you have to put your Stoploss in 5-10 pips from OrderOpen price. Be realistic. If your target is 40-50 pips and you havn't missed nice entry point, just right after you got your trade confirmation, then place your stoploss 2-3 pips behind last fractal, you'll be okay in 90% of the cases.

 

Good luck!

Re: What's your strategy for coping with big losses?

 

thank you indo-investasi... now i become a better trader...

Edited August 7, 2010 by dr0o69

Re: What's your strategy for coping with big losses?

 

Before you enter the trade we must know how much we want to risk our money.

 

Another important thing is, do not trade with your emotional, you must be mechanical (cool bloded) when you execution & stay discipline with your Trading System & Trading Plan.

 

One more thing Keep it Low Leverage.

 

 

Sincerly;

 

 

:-bd

Re: What's your strategy for coping with big losses?

 

Hi,

 

First, losses in this game is inevitable, so long as we don't loss our confidence & capital. We must accept it

mentally.

 

Next, big loss are result of unplanned trade or loss of discipline that causes it. Hence, the only way is to

have a plan & strategy and follow it strictly without any doubts. No second quest.

 

Take a break from trading to let you cool down and relax like dr0o69 mentioned.

Then come back fresh to see what you done wrong and don't let history repeat again.

Read some psychology from Van Tharp, Mark Douglas & etc.

Re: What's your strategy for coping with big losses?

 

Losses are part of the game.

 

To control losses getting out of hand, I use a simple statement:

 

IF the trade goes against me, but the reason for entering the trade in the first place is still valid, I stay in.

IF the trade goes against me and I see that the initial reason for entering this trade is no longer valid, I get out asap.

 

Works for me. It's all about having a plan and know WHY you pick a trade.

Re: What's your strategy for coping with big losses?

 

for me i'll do exactly same thing with starting. because in trading imho is not profit but survive first - preserve your capital.

 

but...if you suddenly (because of X factor) got huge drawdown, i would suggest take a break from trading. i myself once had 50% drwadown from my options trading experience. it is so stress and had impact on my daily job perfomance.

 

take a break at least 2 weeks. do not even touch trading paltform and never ever see chart for that time. if can (and still have money of course... ;)) ) go and hv fun. do something crazy! do something you like! until you get better.

 

and...before you start to trade again. tell yourself that you have forgive yourself because of past mistake. and let's start a new journey again! (it looks silly but this what i'm doing in the past and still do it now)

 

happy pipsy for you! ;)

 

 

I like this.. it's very good advice :D

 

For me I start crying for day or two :)) just joking :D do what Dr (dr0o69) told you and you be fine and much more wiser for the next time

 

Barbara

Re: What's your strategy for coping with big losses?

 

First thing I would suggest when starting trading is only trade with the money you are afford to lose. Second thing set your stops so that if your SL is hit then you do not feel that now all your money or most of it is gone. Build your MM in that way that there is aslo a recovery plan what you are going to do if your SL is hit. If yu have a plan what to do next then you do not feel so down and you will start to work to climb out from hole.

Re: What's your strategy for coping with big losses?

 

Turn off the computer, go outside and have a coffee in a coffee shop.

 

Kiss your kids, wive, girlfriends, boyfriends.

 

Remember, somebody still love you no matter what.

 

As for me, I watch bugs bunny cartoons.

Re: What's your strategy for coping with big losses?

 

Keep your chin up - Know your limitis and keep on goin!

Re: What's your strategy for coping with big losses?

 

take a shower for an hour and refresh my head.. \m/

Re: What's your strategy for coping with big losses?

 

I think thyat the answer lies in the question...

 

The best way to deal with big losses is to keep them small...

 

Sometimes it is better to have many small losses (with a lower winning percentage), than big losses with higher winning percentage.

 

Happy pipin

 

:)>-

Re: What's your strategy for coping with big losses?

 

Losses happen, i just look at it as an expense, like paying my bills or going on a vacation. I used to try and run from loses it cost me dearly, it is like at war soldiers die, supplies wasted, money lost, as long you as you can gain something back from it you are fine.

Re: What's your strategy for coping with big losses?

 

It would be worthwhile to take a look at what caused the loss. If you have a standard setup with some indicators and you trade everyday with these indicators you should be developing some trust in them. Assuming these indicators have been good to you, then the big loss could be becaue of a fundamental change and may not be a technical change. However, just in case, re-asess your indicators again - remember indicators and EAs lose their "power" after a given time. If you still trust your indicator, then go ahead and continue trading. On the other hand, if you had been experimenting with a new system or strategy, then it is time to dump this new system and get back to your original system.

Re: What's your strategy for coping with big losses?

 

My opinion, when market goes against you, the key is to cut loss sooner. So the use of appropriate stop lost is necessary. The only thing we can control in this game is the amount we can afford to lose. So cut your loser soon and let you winner run. If you can control your lost, you can control drawdown and you avoid big losses.

Re: What's your strategy for coping with big losses?

 

I always set a stoploss so my mind is already prepared to deal with it if it hits.

 

I only tend to daytrade so I've never had a gap up or down which then resulted in a higher than expected loss. If that did happen though, you have to be careful not to 'revenge trade' and get your money back.. the ultimately leads to further losses!

Re: What's your strategy for coping with big losses?

 

Oh yeah, I don't get big losses. I limit my losses to maximum 3%. Easier to recover, just need to pull a 30 pips profit to recover the loss.

Re: What's your strategy for coping with big losses?

 

Some told me once that he who chases after money goes to bed tired and broke! in my experience it is very true. What i had to do to get back on track mentally was to stop thinking of the money, but think in pips which is harder to do genuinely than you might think. the other thing was to halve my usual position size. This works wonders for the emotions when a trade is in drawdown but it takes discipline because you always fight the temptation to increase the position size after a series of successful trades .

Re: What's your strategy for coping with big losses?

 

I put my boat in the water. Go to middle of lake, drop anchor. Scream, Yell, Cry a lot. Then I look at how pretty the lake is. By the time Im back at shore I usually forgot it happened.

Re: What's your strategy for coping with big losses?

 

What I do is get some perspective on the big loss ... this'll be hard to do at first because you don't have enough data ... but, basically keep a track of every trade you do. And represent the results of every trade in terms of a risk multiple. i.e. let's say you were risking $100 on a particular trade (eg: Buy 100 shares @ $10. Stop loss @ $9.) but in the end you made $200. Represent that as 2R (you made twice how much you theoretically risked). On the flipside with that example, lets say you lost $150. Represent that as -1.5R (i.e. you lost one and a half times (probably because of a gap / slippage) the amount you theoretically risked.

 

Now average all your risk multiples to get an answer to the question: "On average, for every unit I risk, how many units do I gain". NOW, even if you have one crazy trade where you lost a lot, that's ok ... look back on the effect this anomaly had on your average return on each dollar risked ... you'll realize that once you have enough trades, these few odd balls shouldn't adversely affect your overall performance much.

 

If you are just starting out, then, as some other posts suggested, focus on capital preservation not growth ... when starting out, your goal is to LEARN without paying much for it ;). Risk a very small amount of your capital on each trade (say 0.25% of your equity) and you shuldn't have huge drawdowns. But still represent all your trades as risk multiples ... this way once you get enough trades and a good enough average risk multiple, you can start upsizing your risk per trade.

Re: What's your strategy for coping with big losses?

 

the worst this is that once you make a loss of suppose 50% , you need to make a profit of 100% to get back to your original capital. So best thing is always follow the risk managment .. Unless you do ... large drawdowns will just make you all the more stressful ...

 

Al the best with your trading.

I'm a novice at trading but personally after a loss, I think we normally get emotionally upset and it affects the trading. We become more "suicidal" and take unnecessary risks. I take a break after some huge losses so I won't have a revenge mentality and start making a martingale attack.